Cloud accounting software company Xero says new funding, mainly from big existing US investors Valar Ventures and Matrix Capital Management, sends a message it's a force to be reckoned with stateside.
CEO Rod Drury says the funds will be used to expand its team in the US, where it now has more than 100 staff, but it won't spend all the investment.
"Part of this is just having a big war chest to send a really clear signal to what we're doing in the US," he says. Xero will have $230 million cash on hand after the capital raising.
The company's US user base is in the early tens of thousands and is growing faster than its other markets did at the firm's point of entry, says Drury. He says Xero is chasing millions of users in the US and is tracking well against competitor Intuit.
Xero potentially has 29 million customers in the US, says David Goel, managing member of Matrix Capital Management.
“Xero is emerging as the definitive software platform for small business worldwide," he says. "Having empowered hundreds of thousands of small and medium-sized businesses in New Zealand, Australia, and the United Kingdom, Xero is poised to do the same for its 29 million potential customers in the United States. We are adding to our investment to help facilitate and accelerate this goal.”
Further backing from Valar - where Facebook investor Peter Thiel is a partner - and Matrix is an endorsement of what Xero has achieved, Drury says. He says those investors are prepared to play a long game on the path to profitability and are "taking a five to ten year window" on the company's development.
"Our two main overseas investors continue to support us as we grow. What we're really pleased about is we have the best guys in tech, the really large funds that are really well connected. We think we have the best guys in the room."
Backing from these well-known investors was also helping Xero attract the best talent, Drury said.
US investment makes up $147 million of the new capital raised. The investment was in 9.92 million shares at $18.15 per share (eight percent of those on issue after the capital raise).
Xero now has more then 211,000 customers globally. It recently moved to a "massive new space" in San Francisco, says Drury, and it has a customer experience centre in Denver and offices in New York and Los Angeles.
Xero reported revenue of $70.6 million at 30 September 2013, up from $38.7 million the previous year. In a blog on the company's website Drury paid tribute to its CFO Ross Jenkings, who he said head built relationships with the "smartest investors in the industry" and drove the round, and thanked First New Zealand Capital's James Lee.
The company's share price stood at $17.95 this morning.
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